Emirates SkyCargo Increases Australian Exposure

BMI notes that Middle Eastern air carriers are becoming increasingly interested in the opportunities presented by the Australian air freight sector, and are increasing their exposure to this market. Emirates SkyCargo, the air freight wing of Dubai flag carrier Emirates, has announced plans to launch four weekly flights to the southern city of Adelaide from November 1, building on its existing Australia-Dubai connections.

According to a statement from SkyCargo, the new service will carry up to 14 tonnes of cargo on each flight in the bellyhold of passenger flights serviced by a B777-300ER. This will take the weekly freight capacity between Dubai and Australia to 1,500 tonnes each week, including three dedicated freighter services each week to Sydney. This is already scheduled to increase; from March 1 Emirates flights from Dubai to Australia will rise to 84 each week. The Adelaide service itself will rise to a daily service from February 1.

BMI notes that Adelaide is currently the fifth-largest Australian airport in terms of air freight handled each year. Although this is unlikely to change as a result of this new service from Emirates SkyCargo, it does present opportunities for the shipment of more niche cargos from the destination. On the Australia to Dubai leg, SkyCargo expects to transport a number of perishable goods such as cold meats and organic farm produce, demanded by the large ex-patriot community in the UAE, in addition to machine parts and other locally produced goods. From Dubai it is expected that electronic equipment from Asia will make up much of the cargo. The new connection will help boost Adelaide's economy through connecting local industries not only with the UAE, but, as the country is a major global freight transport hub, with the rest of the world.

Growth Market For GCC Carriers
Australia Freight Carried By Top Five Airlines, 2010-2011 (market share %)

BMI notes that the Australian market is one in which the rapidly growing air freight carriers of the Middle East are paying a particular interest currently. Qatar Airways has expressed an interest in launching a dedicated freighter service to Perth; Etihad Airways now owns a 10 % stake in Virgin Australia ; and Emirates has recently forged an alliance with Australian airline Qantas on European routes.

We believe that the Gulf carriers will be benefitting at the expense of other airlines. In 2010-2011, Qantas carried the most freight in the Australian market (18.2%), followed by Singapore Airlines (14.5%) and then Emirates on 10.0%. We expect Emirates' share to have grown since then and to continue to do so in the coming years. Qantas and Singapore Airlines have both been struggling with losses while the Middle Eastern carriers continue on their highly profitable growth trajectory.

Air freight carriers will be enticed to increase their exposure to Australia in the coming years by the country's mining boom, developed consumer sector and a pharmaceuticals market worth US$13.3bn in 2011. Between 2000 and 2010 (last available historic data) Australia's air freight sector grew by 11%.


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